Court battle over one driver’s pay could have big impact on “gig economy”

Was Raef Lawson an employee or a business owner when he drove for GrubHub?

SAN FRANCISCO—The first big trial over worker rights in the "gig economy" begins today, and it could answer fundamental questions about how workers in the digital age should be treated, as well as what kinds of benefits, breaks, and pay they're entitled to.

The case that's beginning right now doesn't have a big-name, deep-pocketed defendant like Uber. Rather, the case is the lesser-known Lawson v. Grubhub. Plaintiff Raef Lawson sued Grubhub in 2015, claiming he wasn't properly paid for his work while driving around delivering food for Grubhub. If Lawson was an employee, he'd be eligible for benefits like insurance, unemployment, and reimbursement for expenses like gas and phone bills. He'd have to be paid at least minimum wage and get state-mandated breaks. Lawson was fired from Grubhub because, the company said, he didn't adequately respond to delivery requests.

Lawson can only seek damages, like back pay and additional penalties, for himself. His request to make the case a class action was denied by US Magistrate Judge Jacqueline Scott Corley. Even if Lawson wins a complete victory, it's hardly enough to make much difference to a company like Grubhub, which is becoming a growing force in the food-delivery space and announced last month that it will purchase Yelp's Eat24 service.

The case is bigger than Lawson, though. Whatever precedent is set will make a big difference for Grubhub and other gig economy giants going forward. Lawson is seeking damages under a state law known as the Private Attorneys General Act, or PAGA. That law can result in high financial penalties for violations, but it only applies to employees, not contractors.

If Lawson's quest for additional pay and benefits succeeds, others will surely follow, and the "gig economy" companies could be facing additional hundreds of millions in expenses. If he fails, this new breed of employers will be able to take a tougher stand on their employment rules and will be less likely to budge in the face of worker legal claims.

More gigs, more conflicts

Starting just a few years ago, a new breed of mobile app startups began to offer various types of transportation and delivery services. To do the manpower-intensive jobs like delivering food and groceries, they hired freelance workers who could start and stop their shifts when desired.

It didn't take long before a few workers became dissidents in that "gig economy" and found lawyers who would help them. They argued that they should be treated not as "independent contractors" but as employees, with all the attendant rights—including reimbursed expenses, mandated break times, and minimum wages.

Finding one of the new gig economy companies that hasn't been hit with some type of labor lawsuit is just about impossible. Caviar (food delivery), Postmates (shipping), Homejoy (cleaning), and Instacart (groceries) have all been sued. The biggest target in the gig economy, Uber, settled a lawsuit over the employee vs. contractor issue last year, agreeing to pay up to $100 million in cash to drivers but keeping their contractor status. In March, competitor Lyft settled similar claims for $27 million.

The trial started this morning and is expected to last around two weeks. It is a bench trial, meaning there is no jury involved.